my prefer rens would have been to solve all problems in

the context of a larger agreement, a bigger deal, a grand bargain but with this congress that was a little too much to hope for at this time. >> you heard it for yourself. the president antagonizing and in sust insulting republicans. and then there was this. >> that reform has to go hand in hand with reforming our tax code so that wealthy individuals and the biggest corporations can't take advantage to deductions to those standing up here that aren't available to most americans. >> that was the first time that the public has heard the president say that he wants to raise taxes next year.

>> let's pass the tax relief portion now, let's take what has been agreed to and get moving and we will continue to work on finding smarter ways to cut spending but let's not let that hold up the tax hike that will take place in ten hours. >> i want to give a kudos to senator biden. good for him and good for mcconnell. good evening. this is the kudlow report. now there still may be a vote in the senate tonight. the breaking news story devel developing on a minute by minute basis. let's bring in john who has been doing a brilliant job. good evening. >> reporter: we are still waiting for the wrap up of a

deal between vice president biden and senate republican leader mcconnell. i got a message from a source in the senate who said we are getting there on wrapping up democratic obsessions to the deal. one is over the issue of the cross the board budget cuts. democrats want to put those off at least a year. not kick the can for a couple of months down the road. another was on the estate tax. it would go up to 40%. some see that as a victory. but others say that is not a good deal especially when you say that republicans have it. let's run over the provisions that have been agreed to. taxes would go up to 39.6%.

the clinton era rates on income on $450,000 for couples. the deductions would be faced out. personal exceptions and deduction values would be phased out for incomes of $230,000 more and $300,000 for married couples. estate tax would go up and we would see an extension of unemployment benefits and they would be preventing the sharp drop for doctors under medicare. and the alternative minimum tax and capital gains and those are the outlines of the tax portions of the deal still not buttons up yet. >> we will see you later in the

program. we appreciate everything you have done today and we have more information from amon. what are you hearing? >> we are expecting that vice president biden might be coming up here to talk to democrats. a lot of these members do not like being here on new year's eve. they are working through a lot of the scoring details of a new package here. but he expects that there might be a vote in the next couple of hours in the senate. take a listen. >> it is not something that any of us would say oh, i love it. i don't live love it but i thin good job of negotiating where there are some wins and losses and it is about even.

>> house republicans are keeping their powder dry. >> he wants to wait and see it on paper before he commit to voting for it. so right now at least we don't know whether a deal that is likely to pass in the senate could pass the house of representatives. are you surprised and isn't it interesting that vice president joe biden and senate republican leader mitch mcconnell have taken this thing and put it together i think it is quite interesting to me. >> it speaks to the power of personal relationship to me. interestingly it speaks to the relationship between mcconnell and harry reid. clearly the personal animosity got to be too much for those two

to continue negotiating. clearly the president was happy with biden being a part of this final push here. if the reports are right, he is coming up to sell the deal to him. a lot of whom have expressed reservations about him. >> now, let's get reaction from the senate side. senator tom coburn as always sir, if we are going to throw over the see quester, i get that, but the thing that bothers me the most. if we are going to substitute tax revenues instead, i think that leads us down the wrong road. i agree. look, cutting $1.2 trillion over the next ten years was hard one to battle hard for the country

to go through. what is being proposed now is $600 billion in tax increased with about a fifth of it to be spent to buy down things. with $480 billion to decrease the deficit. we had our choice we wouldn't be doing it that way. the government is too big and in effective we could take most of the money by decreasing spending. the 11th hour and there are a lot of people who shouldn't be having tax increases if we don't reach a compromise. so those are two different questions and i'm not about to give up the $1.2 trillion. we haven't cut a penny yet. so, that is not something i'm willing to give up. that is the thing. let start there. your book, your work, your

speeches, you have identified hundreds and hundreds of billions of dollars of waste that the government doesn't need and the country doesn't need and it seems to evaporate. and from what i gather, the debate right now is whether to put off the spending cuts, it is always maniana when it come to spending, sir. and you no as well as i do, taxing the successful earners is not going to solve our problem. >> there is one bright side. if this bill happens, 95% of americans are going to have rates locked in. they are going to have some sernl ti for the future and that is one of the big things that is keeping us from growing now. they don't see the feature. is it a perfect win?

absolutely not. it is the wrong way to grow the economy but it is better than having the tax increases go through and seeing us folding. >> under the circumstances you are probably right. let me ask you this, do you think tonight there will be a senate vote? >> well, i can there should be late tonight or early in the am, even if this getsen acted, but the very point of it is, when you have a deal of this nature. you need to get it passed you need to have the interest groups when you have things that they think is wrong is it. happy new year to you. >> all right folks picking up on that. i'm going to give this whole fiscal deal make one and a half

cheers out of a possible three. maybe one and a half, yes, mainly, it will avert a recession caused by a $500 billion tax hike. okay. that is good. but as a mentioned to mr. coburt. spending which is the real problem essentially untouched, this is disgraceful. and then i'm going to ask, why is this country taxing the most productive small business owners. this is america we are for non class warfare. we believe in success but at the end, i will acknowledge at least on taxes is probably the best deal we could get under difficult circumstances we are going to walk through this tax

story. let's get expert political commentary. all right, robert, let me begin with this. harry reid was going to bring a bill to the floor. they applauded him tonight for getting that threshold up. so they feel that is a success on tax breaks. and igore as i understand it. all of your good friends and the respectful liberals, they do not want $400,000 they would rather go back to $200,000.

they don't want to cut spending. they want the 250. it is what he campaigned on and what he wanted. the president has put medicare cuts on the table. and very controversial with his caucus. a lot of us think it should not be off the table. he went there. he went there half way more. >> the senate democrats vetod any cost of living adjustment. >> right. this is why he had to be pushed out and mitch mcconnell had to be taken over by joe biden. they don't want to cut spending they want to raise taxes. if you want to talk about it later, it should be part of a different deal. but when it comes to different

cuts in medicare. this is what is on the table. it brings efficiency into the system. it was part of the president's budget in 2012. republicans didn't want to deal with it. that budget you talk about got zero votes in the senate. hang on igor. let me cut to the chase. if there is a deal, i don't know what they are going to do about a see quester. what is going to happen on the spending side which the bulk don't think they want to cut spending. he says he is hoping for a vote tonight. probably around 1:00 am tonight. a lot of senators walked out of that meeting tonight and they say they feel they are close to a deal. if they can get democrats to agree for a month or two and they agree they feel they can

send it to the house. this is so important, will a majority of democrats back this? and i assume it is going to be a 51 majority vote. how is this going to play out? >> that is the reason the vote is going to go late tonight. vice president biden will probably come to capitol hill tonight. they don't like the rate ares and there is still some hesitation. the big story tonight is that republicans are going to unit behind mcconnell. going to leave it there. thank you gentlemen. we are going to go back to washington and get an update on this developing story. that comes later. don't forget folks free market capitalism is the best path to prosperity. it means limited government and

limited government spending and rewarding success. i'm kudlow and the kudlow report will be right back. >> this new year's day kick off 2013 in style with the look at what made 2012 unforunforgettab. the new year's day marathon all day on cnbc. nderstand. oh no, it's actually my geico app...see? ...i just uh paid my bill. did you really? from the plane? yeah, i can manage my policy, get roadside assistance, pretty much access geico 24/7. sounds a little too good to be true sir. i'll believe that when pigs fly. ok, did she seriously just say that? geico. just click away with our free mobile app. we believe the more you know, the better you trade. so we have ongoing webinars and interactive learning, plus, in-branch seminars at over 500 locations,

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all right some more expert

opinion on a possible vote on this so called fiscal cliff. i'm going to bring in the republican from the great state of caps cannes. always great to have you on the show. first of all, will the majority of republicans vote for this deal even though i'm not sure what the deal is on the sequester side? >> is there is an interest of solving the problem i think what you said is how most republican ares feel. we need to know the details of the deal and i'm on the side if it is going to be postponed it is going to be paid for by reduced spending elsewhere. that is the wrong direction to go. so while there is an interest and believe that we are getting close to a deal, there is yet enough unknown that you can't answer your question at this

time. >> it troubles me, if you run off the sequester and run off the tax revenues to make up the difference which is what the president said today in his goofy press conference. if that happens, i want to ask you if this thing can actually pass. too quick, 51 votes and 60 votes and democrats and republican ares can the two come together? is that how it might work? >> my guess is that this could be a 51 vote margin issue. whether it is 51 or 60, the president's remarks he is peered to me that he was trying to make certain that the deal isn't pass. he was souring to many of us to

watch the president perform in that way, despite the personal of politics of that, what i find proubli i troubling is that he is saying even with these tax increases, that is not enough. i'm coming back and asking for move in the feature. it is going to be more. >> as far as i know, it is the first time that he has said that. if this deal is accomplished tonight and it includes tax increases on one percent of the taxpayers, this is it. there is no more taxes, the president has campaigned on this issue. he has had his in that sense victory and has no standing to

come back and ask republicans or any member of congress to vote to raise taxes further. the ko focus has got to be on spending. there are a lot of people, who say the president wanted to go over the cliff. and you know what, my thought is this, maybe they did and they blamed the republicans. but the reality is a recession would sink bam's second term. recession will sink his second term. that is why i think the president played his hand all wrong today. the president didn't do himself any favors. i have been skeptical that there would be a deal. the president was not interested and had concluded that the politics were against republicans and in my view that

may be true. but that is in the short-term and in the long-term the president and the democrats would own the resection if we can't get this thing through. preappreciate your time will there be a vote tonight? will there be something to vote on? >> that is the billion dollar question. it seems to me that we are headed in that direction. >> all right many, many thinks kansas republican senator. happy new year to you, sir. >> the market has made a strong statement to you. on a big rally, that is up next. >> i'd like to be hopeful but it looks like they are going to blow. >> the linchpin is whether john boehner can bring his troop as long. >> we need to get this right.

>> the president is not, not going to make a new offer in this meeting today. >> the dow has fallen to the new lows. >> we may still be able to reach an agreement.

all right cliff or not, the markets finished 2012 in good fashion. the for the year the s&p 500 up a healthy 13.4%. all right joining us now is london based cnbc's kelly evran. before she deserted me, she was a regular on this program. good year for the s&p 500. actually, judging from the numbers, the economy could be even stronger. looks like the back end got

better. here is the interesting thing. business investment could be a weak spot. if it is not because of the fiscal cliff, then there is more reason to be concerned. we saw in the sentiment figures, especially in the last month, there is a clear sentiment shot. perhaps even a real spending shot for businesses. five months of slumping, the last two months showed healthy gains. consumer spending, personal income, unemployment claims are low. what do you make of that? >> that is the first thing we are getting. but, harrison, makes a good point, is the concern shifting from the business sector to consumers which are are going wait a minute. the return is happening. the weakness of consumers will

be one reason to pause in the first quarter now that we know the debt ceiling is in the quarter. >> that is going to remove the first quarter. coming back. kelly evans is going to stay with us for the rest of the show. and we will go back to washington for updates on the fiscal cliff. we'll see, i'm larry kudlow. stay with us. kick off 2013 with style. people and industries and million dollars rackets. the new year's day marathon on cnbc. 315 horsepower. what's that in reindeer-power? [ laughs ] [ pencil scratches ] [ male announcer ] chevy's giving more.

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the whole fiscal cliff in washington tonight. let's get the latest from our pal at capitol hill. what is cooking? >> good evening. we are told that they are expected to go very, very late tonight. a couple of quick points on that. in four and a half hours from now. we trip over that magical point where they will be voting for a p tax cut. and then one interesting vo ini members of congress, they are told by the leadership in the house republican side that they

are too for the rest of the night remain in an accessible state. i'm told that they were not talking about their physical location. they were told to be prepared to have to vote later on this evening i should say, larry. >> not to speak of their enebriation. >> that is correct. at some point they may have to send out the mp's. >> i love that. me, i haven't had that in close to 18 years god bless. >> and you are a better man for it. >> you are sweet. let's move on. here is an update from an old friend and pair of ours, author of "beyond outrage" and steve moore, i guess robert reich

attacks things, but why is it your democratic friends never want to cut spending and never want to shrink the government? why is that? >> i think a lot of documents are willing to cut spending that maybe you would agree with, larry. the problem with this bill, the biggest problem is it doesn't deal with the debt ceiling. we are going to have trench warfare and this is not going to end. >> the debt ceiling which is a scary thing. the republican's last shot at leverage, but markets get real nervous as i do when you start messing around with the us credit worthy news. and during the negotiations the democrats had no interesting

spending. let me say one thing about this deal. if you look at the specifics of the deal, you know, it is not such a terrible thing, it is probably the best that republicans could get. but i want to make this point loud and clear. this is raising taxes on investment and businesses. i don't see anything good about it for the markets. we finally have resolution on things. raising taxes is no way to grow the economy. i think they are reading your back too much. they are raising tax rates across the board. >> we might even disagree through 2013 on this one. >> look, the problem here is that it is the middle class, and the lower middle class rate jobs by their spending and if you

increase taxes on average working people and make their burdens greater in whatever way you do it, and you cut spending which is important, when you have high unemployment you have more spending, this is going to be a huge burden on them. >> i don't get it. you are a good man, and i respect you. if you are raising tax rates, it could have been worse. but you are raising tax rates on this kind of bill and more coming next year and you are jacking up tax rates on those most likely to invest in businesses and the economy and machinery and jobs. why would you want to tax those who are most likely to invest i don't get it. >> i'll tell you why, larry, there is something called the budget deficit. you might not think it is the

huge deal right now, but somebody has to fork over money to deal with it and we have to cut spending and public services and the question is on whom is the bur dep of that going to fall? and here is where the nubbins of where you and steve and i part ways. it seems to me that right now wealthy people of big corporations don't have it to invest. >> i'll give you the last word. >> that means he gets the last word of the year. >> something for you to bon der. >> what is the next act for the liberal democrats like you? >> you are going to get your pound of flesh out of rish people. but it is only going to give you so much. if we don't get serious about the spending side, you are going

to have to get after the middle class. health care costs, we have to deal with health care costs. >> obamacare. you look at the websites, obamacare is going to raise taxes another trillion dollars. >> i don't care it is up to 18 percent of our gdp. >> obamacare. >> happy new year, you tax increase fiend. >> thank you. let's get back to the markets. joe bid joins us now is kelly evans and let's bring in lee mun sen. he is the author of "rigged money". can i assume that somehow we have to look past the cliff? the tax thing is going to be okay. not to my liking but not as bad

as i feared and there won't be spending cuts, there never are. forget the cliff tell me what to do in the market for 2013. give me market wisdom. >> larry, i know that you say the only thing you have held for the next ten years served you very well, i'd say going into next year, go with small cap. if you are going to have growth, i think the small cap indexes, forget growth, stay with that, if you want the underdog, invest in the emerging markets, if you are retired or close to it, avoid the high dividend paying stocks, there is too much money. stick with small caps and don't get crazy. >> all right. he's more optimistic than you

are. long-term and short-term. talk about the first quarter a little bit. we have seen stocks and it looks like that is still happening. but we haven't gotten over to the debt ceiling yet. the more i feel like this is going to be at the sight of a huge battle. i wonder if you want exposure for the s&p between now and then. the biggest indicator that we can look at here and bring out to the viewers is look at the ten year treasury and look at the bopd markets if the global markets were that concerned we wouldn't see who rates this low. >> that is not true because what we are seeing our treasury yields falling. are people getting more concerned. it is not about a back up in

yields. it is more about yields declining again. that seems like the most likely thing that can happen here. >> can i insert a newly emerging count country? japan. they are properly devaluing their currency and pouring in money and raising their inflation to get out of deflation. >> in japan, i absolutely think the new japanese government is right. they need monetary stimulus. on the yen, dropping the yen, right. exports imports this is what they should do. that is why the market is

responding. >> i think i'm going to tell you th that. >> fiscal stimulus to me means low marginal tax rates. >> now, let's get a look at how things look from the republican side. she is about to join us right after the break. stay with us in japan. >> tonight the face kal cliff deadline hours away. will dc leaders reach a deal and avoid the prluthth. see who will rise above. ut. with unitedhealthcare, i get information that matters... my individual health profile. not random statistics. they even reward me for addressing my health risks.

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all right we have an important non fiscal story that we want to update you on. very, very serious. hillary clinton deteriorating medical condition. courtney reagan joins us with the details. >> good evening. the state department reached a statement about her condition. a routine follow up revealed a clot in the vein between the skull and the ear. she is being treated with blood thinners to disolve that clot.

getting that right is difficult. the doctors say she is in good spirits and did not have a stroke or suffer neurological damage. so that is good. >> thank you for that update and happy new year to you. god bless mrs. clinton. now let's move on. we welcome back republican are congresswom congresswoman nan heyworth. the senate has to sign a bill over there. >> larry, our feel something this. we have done everything we can to get this issue resolved in the right way for every american. let's start with the attitude of having a budget. as you know, we passed a budget for the past two years.

we have passed measures to control spending and have fought hard to approach it responsibly. when the president brought those good people together today i thought he was going to apologize to them for the fact that this lack of leadership has led us to this cliff. >> if you get some kind of bill, i don't know what it is either. but if it is $450,000 and the amt is passed permanently and a lot of good things better than we hoped for. and let's say for argument's sake. there is a 20 or $30 billion spending cut. maybe it is see questers, could you vote for that kind of bill? >> i want to move forward larry if that is the best that we can do under these circumstances i would support that kind of a bill, but believe me, i think i

can share this sentiment. we could do so much better. we need a real pro growth economy and we could have that. we passed a tax reform plan in the house of representatives. senator reid and his leadership have done nothing to advance the cause for the american people. i'm giving it one cheer maybe one and a half cheers. but, congresswoman, let me ask you, if yyou going to hang out near the capitol. might there possibly be a house vote on this bill? if it did, do you think it is possible there will be a vote tonight? we have been told to stand by. we are doing everything that we can to act to provide

reassurance to keep us from going off the cliff and i hope and pray that from this experience that the leadership and the senate will wark together because we have been doing everything we can to advance this clause. larry, i know you know that but it is going to be eight days orange of help for the federal government. >> but the deal, the modified deal is going to get done. it is going to be tomorrow or wednesday or thursday at the latest. for our viewers out there. i know the house is in section all week. >> i know that is what is the leadership is pushing for us to

vote, but we certainly contend, we have done our work all along, we need to see the senate and the president come together with us and get the right job done. merry christmas and happy new year. >> up next, it is time for a panel to wrap things up. and the year 2012. we have roger stone and keith boykin.

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as we head into the home stretch of 2012 the final hours of falling off the fiscal cliff let's bring in our power house political panel. roger stone long time veteran republican are strategist and larry elder, author of the best selling book dear father and dear son. two lives eight hours. welcome and i'm going to say roger stone, should the republican ares support this bill as we know it now? i really think not larry, i think what you are seeing washington at it's worst. republicans in the senate cooling their heels where three

guys are behind closed doors where they can tinker around the edges in a system that needs pro growth strategies. instead we are going to get a band-aid? no. i don't think the results will be as good as everybody thinks. it is time to deal you know with the entitlements. keith, listening to president obama today who was not at his new year's gracious and listening to harry reid who is effe effectual in everything he does, do you think the democrats would rather see us go over the cliff take the revenues and know the spending cuts and that is it?

more money and more spending? >> i think the democrats want to make sure that the tax rates for the top earners go up and there is going to be a deficit reduction. but i think it will be more of a statement. i don't think it will be that more aggressive. i think they passed fewer bills than any bills and i think that the president is on firm ground to what they want to do. i have said on this network and in other places before, it is an rtficial crisis generated by policieses in washington that could have been avoided. republicans don't care about deficit reduction. if they had they would have allowed it to take place and

reduced the deficit. >> i am always interested in what he has to say. it is interesting, this vote asked, what do conservatives and republicans believe in the house and what do republicans believe? as i have said to you from day one, democrats want the fiscal cliff. howard dean said on your program, it is the best deal that they are going to get. the republicans would never go along with and they are going to get tax raises on rich people. and when we go off the physical cliff congress goes back into session. republicans are blamed for the bad economy and roger is right. the three programs, social security and medicare and medicaid have been untouched. roger, the reason i give this one cheer out of three cheers, i

think he is right. the democrats are salivating to demonize and this deal is the best they are going to get. >> in this one, some people say, that the real hidden agenda is to break the pledge on tax cuts and break the republican party in two. do you agree with that? >> if we break the party is done. >> and you heard what the great roger stone said. is mr. obama in it to break the party or the gop? >> as a democrat, i wish that, but the reality is he is far more liberal than they think he s he wants the deal.

regardless of what howard dean wants, he clearly wants a deal and whether or not he is going to get it doesn't seem like it is going to happen before midnight. that is one of these issues that elections are supposed to decide those things. >> and larry elder. i'll give you the last word on our new year's show. the debt ceiling is coming. but nobody wants america to default. >> the debt ceiling is coming. the end game is a value added tax on top of the irs so that we have the western style welfare state. tax es are going to go up next year also. >> maybe. >> taxes. >> president obama has never said anyone of those thing. >> happy new year. thank you very much. thank you very much. appreciate it.

the night continues head over to cnbc.com for the latest. happy new year everybody and all of 2012. excuse me, sir i'm gonna have to ask you to power down your little word game. i think your friends will understand. oh no, it's actually my geico app...see? ...i just uh paid my bill. did you really? from the plane? yeah, i can manage my policy, get roadside assistance, pretty much access geico 24/7. sounds a little too good to be true sir. i'll believe that when pigs fly. ok, did she seriously just say that?

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